What Is a Health Savings Account?

"HSA" stands for Health Savings Account. HSAs allow consumers to pay for qualified medical expenses with pre-tax dollars—meaning income-tax free—and save for retirement on a tax-deferred basis.

An HSA is tax-favored savings account that is used in conjunction with a high-deductible HSA-compatible health insurance plan to make healthcare more affordable and to save for retirement.

HSAs are similar to individual retirement accounts (IRAs), but even better:

  • Pre-tax money is deposited each year into an HSA and can be easily withdrawn at any time with no penalty or taxes to pay for qualified medical expenses. Withdrawals can also be made for non-medical purposes, but will be taxed as normal income and are subject to a 10 percent penalty if done prior to age 65.

  • Any HSA funds not used each year remain in the account, and earn interest tax-free to supplement medical expenses at any time in the future.

  • Like an IRA, the account belongs to you, not your employer. But unlike an IRA, your employer CAN contribute to your HSA.

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